IN RE: ZOOM VIDEO COMMUNICATIONS, INC. PRIVACY LITIGATION

• Court: District Court, N.D. California
• Decided: February 23, 2023
• Docket: 3:20-cv-02155
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 NORTHERN DISTRICT OF CALIFORNIA 10 San Francisco Division 11 IN RE: ZOOM VIDEO Case No. 20-cv-02155-LB COMMUNICATIONS, INC. PRIVACY 12 LITIGATION ORDER DENYING OBJECTORS’ MOTIONS FOR ATTORNEY’S FEES 13 AND INCENTIVE AWARDS

14 This Document Relates To: Re: ECF Nos. 262, 263 15 ALL ACTIONS. 16 17 INTRODUCTION 18 In this class action against Zoom Video Communications, the plaintiffs alleged that Zoom 19 improperly shared their data through third-party software-development kits from companies such 20 as Facebook and Google, claimed to have end-to-end encryption when it did not, and failed to 21 prevent “Zoombombing” (disruptions of Zoom meetings by third-party actors).1 The parties 22 settled the case, and the court approved the settlement over the objections of several class 23 members.2 Two appeals were filed: one by objectors Alvery Neace and Sammy Rodgers and one 24 25 26 1 Second Am. Compl. (SAC) – ECF No. 179 at 3–5 (¶¶ 4–9). Record citations refer to material in the Electronic Case File (ECF); pinpoint citations are to the ECF-generated page numbers at the top of the 27 documents. 2 Settlement Agreement, Ex. 1 to Wolfson & Molumphy Decl. in Supp. of Mot. for Prelim. Approval – 1 by objector Judith Cohen.3 The parties then settled with those objectors, agreeing in exchange for 2 withdrawal of the objections to improve the class settlement and allow the appealing objectors to 3 apply for attorney’s fees, costs, and incentive awards.4 The court approved the two objector 4 settlements and the modified class settlement after the Ninth Circuit remanded for that purpose.5 5 The settling objectors then moved for attorney’s fees, costs, and incentive awards.6 The 6 motions are denied because the settling objectors did not substantially enhance the class 7 settlement’s benefits to the class. 8 STATEMENT 9 The two settlements with the objectors addressed their original objections, as follows. 10 (Capitalized terms are defined in the settlement agreement with the class.) 11 The Neace/Rodgers settlement “facilitate[s] the claims and distribution process.”7 The parties’ 12 previous motion for an indicative ruling summarized the changes: 13 Rodgers and Neace Objection Argument Agreed Procedure to Settle Objection 14 Settlement Administrator should notify For returned checks from Settlement Class claimants if their check is returned by the post Members, the Settlement Administrator will 15 office. (ECF No. 228 at 13–14) run address correction, check forwards, and 16 send payments to the corrected addresses when possible. (Rodgers/Neace Settlement 17 Agreement ¶ 2(b).) 18 For returned checks from Settlement Class 19 Members, the Settlement Administrator will 20 also notify such claimants via email to update their address. (Rodgers/Neace Settlement 21 Agreement ¶ 2(c).) 22

23 3 Notices of Appeal – ECF Nos. 251–52. 24 4 Rodgers & Neace Settlement Agreement, Ex. A to Wolfson & Molumphy Decl. in Supp. of Mot. for Indicative Ruling – ECF No. 255-2; Cohen Settlement Agreement, Ex. B to id. – ECF No. 255-3. 25 5 Order – ECF No. 257; 9th Cir. Order – ECF No. 258; Order – ECF No. 261; 9th Cir. Order – ECF No. 265. 26 6 Mots. – ECF Nos. 262–63. 27 7 Wolfson & Molumphy Decl. in Supp. of Mot. for Indicative Ruling – ECF No. 255-1 at 2 (¶ 5); Rodgers & Neace Settlement Agreement, Ex. A to id. – ECF No. 255-2 at 4–5 (¶ 2); Roth Decl. – ECF 1 A normal business (#10) envelope should be The Settlement Administrator will mail the used to send settlement checks. (ECF No. 228 checks issued pursuant to the Settlement 2 at 13.) Agreement to eligible Settlement Class Members via USPS first class mail, in a 3 number 10 business envelope. (Rodgers/Neace 4 Settlement Agreement ¶ 2(a).) 5 90 days is not sufficient time to cash Zoom and Plaintiffs will amend the Settlement settlement checks. (ECF No. 228 at 14–15) Agreement (§§ 2.5(c)–(e)) to extend the 6 deadline for Settlement Class Members to cash a settlement check by 30 days, from 90 days to 7 120 days. (Rodgers/Neace Settlement Agreement ¶ 2(d).) 8 9 Address change form should be easier to The Settlement Administrator will include a locate. Settlement Administrator should link to the form for Settlement Class Members 10 provide confirmation/receipt for address to change their contact information on the change when made. (ECF No. 228 at 16–17) home page of the Settlement Website, with a 11 statement that the form can be used to update email addresses, mailing addresses, or both, 12 and with directions on how to include all 13 current contact information, including mailing and email addresses. The Settlement 14 Administrator will also send an email to Settlement Class Members completing the 15 form, confirming their updated contact information. (Rodgers/Neace Settlement 16 Agreement ¶ 2(e).)8 17 18 The Cohen settlement provides for a “limitation [on] the scope of the release.”9 Specifically, 19 the parties agreed to add a new Section 8.3 to the Settlement Agreement that excludes certain 20 claims by licensed professionals from the settlement’s release: 21 Releasing Parties do not hereby release claims against Zoom by a state-licensed professional (a “Professional”) for indemnification or contribution against Zoom 22 for damages or losses sustained by that Professional for a Breach of a Confidentiality Claim. “Breach of Confidentiality Claim” herein means a claim 23 brought in a lawsuit or arbitral proceeding against the Professional by a patient or 24 client for breach of a confidentiality obligation that (i) is imposed by (a) written contract between the Professional and patient or client related to the provision of 25 professional services to the patient or client or (b) federal or state statute that specifically confers an obligation of confidentiality on the Professional 26

27 8 Mot. for Indicative Ruling – ECF No. 255 at 4–5. communications, and (ii) is predicated on an allegation that the encryption Zoom 1 employed was not end-to-end encryption when the Professional understood Zoom 2 to have been employing end-to-end encryption.10 3 In exchange for the changes to the class settlement and the opportunity to apply for attorney’s 4 fees, costs, and incentive awards, the settling objectors agreed to release their objections and 5 dismiss their appeals with prejudice. If granted, their attorney’s fees, costs, and incentive awards 6 are to be paid from the court’s prior award of attorney’s fees to Class Counsel.11 7 All parties consented to magistrate-judge jurisdiction.12 (The settling objectors need not 8 separately consent because named class members’ consents are on behalf of all unnamed class 9 members. Koby v. ARS Nat’l Servs., Inc., 846 F.3d 1071, 1077 (9th Cir. 2017).) The court held a 10 hearing on February 9, 2023. 11 ANALYSIS 12 Jurisdiction 13 After the settling objectors filed their motions, unnamed class member Alfred Gonzalez filed a 14 notice of appeal of the court’s order approving the changes to the class settlement.13 “[T]he filing 15 of a notice of appeal generally divests the trial court of jurisdiction.” See, e.g., In re Silberkraus, 16 336 F.3d 864, 869 (9th Cir. 2003). But the court can decide “a request for attorney’s fees 17 attributable to the case” despite a pending appeal. Budinich v. Becton Dickinson & Co., 486 U.S. 18 196, 202–03 (1988); see Lobatz v. U.S. W. Cellular of Cal., Inc., 222 F.3d 1142, 1145 (9th Cir. 19 2000) (the same rule applies in the class-action-settlement context) (citing Budinich, 486 U.S. at 20 202–03). Thus, the court has jurisdiction to decide the present motions. 21 22 23

24 10 Cohen Settlement Agreement, Ex. B to Wolfson & Molumphy Decl. in Supp. of Mot. for Indicative 25 Ruling – ECF No. 255-3 at 4 (¶ 2). 11 Rodgers & Neace Settlement Agreement, Ex. A to Wolfson & Molumphy Decl. in Supp. of Mot. for 26 Indicative Ruling – ECF No. 255-2 at 3–4 (¶ 1.2), 5 (¶¶ 3–4); Cohen Settlement Agreement, Ex. B to id. – ECF No. 255-3 at 3–4 (¶ 1.2), 5 (¶¶ 3–4). 27 12 Joint Consent – ECF No. 211. 1 Legal Standard 2 Any “payment or other consideration . . . provided in connection with . . . withdrawing an 3 objection” to a class-action settlement must be approved by the court. Fed. R. Civ. P. 4 23(e)(5)(B)(i). That consideration can be in the form of incentive awards for objectors and/or 5 attorney’s fees and costs for their counsel. See, e.g., Fraley v. Facebook, Inc., No. C 11-1726 RS, 6 2014 WL 806072, at *1 (N.D. Cal. Feb. 27, 2014). 7 The consideration can be approved only if the objector “substantially enhanced the benefits to 8 the class under the settlement.” Vizcaino v. Microsoft Corp., 290 F.3d 1043, 1051–52 (9th Cir. 9 2002); Rodriguez v. W. Publ’g Corp., 563 F.3d 948, 963 (9th Cir. 2009) ($325,000 increase to the 10 settlement fund was a substantial enhancement); Fraley, 2014 WL 806072, at *1–2. This is “a mark 11 [that] few objectors hit.” 5 Newberg & Rubenstein on Class Actions § 15:60 & n.15 (6th ed. 2022) 12 (collecting cases in this circuit). 13 “The ‘substantial benefit’ need not be financial,” but if it is not, “the court must carefully 14 scrutinize the benefits conferred” to determine whether they are more than “technical or 15 coincidental.” In re HP Inkjet Printer Litig., No. 05-cv-03580-JF, 2011 WL 2462475, at *1 (N.D. 16 Cal. June 20, 2011); In re Leapfrog Enters., Sec. Litig., No. 03-cv-05421-RMW, 2008 WL 17 5000208, at *3 (N.D. Cal. Nov. 21, 2008) (“Courts have generally taken special care when 18 awarding fees to an objector where no monetary benefit has been provided to the class.”). Also, 19 “minor procedural changes in the settlement agreement” do not qualify as a substantial 20 enhancement. Rodriguez v. Disner, 688 F.3d 645, 658 (9th Cir. 2012) (cleaned up). But if, for 21 example, an objector clarifies the scope of the settlement’s release, it might be a substantial 22 benefit. Kurihara v. Best Buy Co., No. 06-cv-01884-MHP (EMC), 2010 WL 11575583, at *3 23 (N.D. Cal. June 7, 2010), R. & R. adopted, No. 06-cv-01884-MHP (EMC), 2010 WL 11575584 24 (N.D. Cal. July 6, 2010). 25 Aside from the requirement of a substantial enhancement, there are other limits on objectors’ 26 and their counsel’s entitlement to consideration. The benefit conferred by the objector must be 27 “worth more than the fee [the objector is] seeking.” Fraley, 2014 WL 806072, at *2. “[W]here 1 the litigation,” no fees should be awarded. Rodriguez, 688 F.3d at 659. And fees should not be 2 awarded “to objectors whose work is duplicative, or who merely echo each others’ arguments and 3 confer no unique benefit [on] the class.” Id. at 658–59. 4 If the foregoing requirements are met, the amount of the fee award for objector counsel is a 5 matter for the court’s discretion. Id. at 653. Fees should be evaluated “on the same equitable 6 principles as [fees for] class counsel.” Id. at 658. Thus, courts may calculate the fees under either 7 the “lodestar” or “percentage” methods. Fischel v. Equitable Life Assurance Soc’y of the U.S., 307 8 F.3d 997, 1006 (9th Cir. 2002). The percentage calculation is based on a percentage of the benefits 9 the objector conferred on the class, and the Ninth Circuit’s “benchmark” award is twenty-five 10 percent. Kurihara, 2010 WL 11575583, at *3 (awarding 29.9% where the benefit conferred was 11 $52,335). The lodestar calculation is used “when special circumstances indicate that the percentage 12 recovery would be either too small or too large in light of the hours devoted to the case or other 13 relevant factors.” Wininger v. SI Mgmt. L.P., 301 F.3d 1115, 1127 (9th Cir. 2002) (cleaned up). 14 That said, courts’ awards to objector counsel “tend to be lodestar-based.” 5 Newberg & 15 Rubenstein on Class Actions § 15:94 & n.6 (6th ed. 2022) (citing In re Riverstone Networks, Inc., 16 256 F. App’x 168, 170 (9th Cir. 2007)). Often, this is because “the objections generated no 17 quantifiable monetary reward for the class.” Id. & n.24 (collecting cases in this circuit). And even 18 where the benefit was monetary, “a percentage approach is often likely to embody a windfall; this 19 can be avoided if the court cross-checks the percentage award with objector counsel’s lodestar.” Id. 20 & n.28. “Courts using the lodestar method typically decline to apply a [positive] multiplier[.]” Id. & 21 n.25 (citing Rodriguez v. W. Publ’g Corp., 602 F. App’x 385, 387 (9th Cir. 2015)); In re 22 Transpacific Passenger Air Transp. Antitrust Litig., No. 07-cv-05634-CRB, 2015 WL 4776946, at 23 *2 (N.D. Cal. Aug. 13, 2015) (applying a slightly negative multiplier). 24 “[T]he proper procedure” for approval of a payment to objector counsel “is by motion under 25 Rule 23(h) for an award of fees.” Fed. R. Civ. P. 23 advisory committee’s note to 2018 26 amendments. Objector counsel “bears the burden of submitting detailed time records justifying the 27 hours claimed to have been expended.” Wininger, 301 F.3d at 1126. 1 Application 2 First, Judith Cohen moves for $77,153 in attorney’s fees, $847 in costs, and an incentive award 3 of $1,000.14 The threshold issue is whether Cohen “substantially enhanced the benefits to the 4 class.” Vizcaino, 290 F.3d at 1051–52. Cohen achieved a narrower release and argues that 5 “[c]ourts in this Circuit recognize that narrowing the scope” of a release is a substantial 6 enhancement.15 The plaintiffs oppose the request and contend that Cohen achieved only a 7 “narrow” exception to the release, relevant only “in the (unlikely) future event that professional 8 Zoom users are sued by their clients for a breach of confidentiality relating to a Zoom meeting.”16 9 Cohen enhanced the benefits to the class, but not substantially. The scope-of-release cases 10 where objectors achieved a substantial enhancement are distinguishable because those objectors 11 caused overbroad releases to be limited to the facts alleged in the operative complaint. See, e.g., 12 Marshall v. Northrop Grumman Corp., No. 16-cv-06794-AB-JCX, 2020 WL 5668963, at *1–4 13 (C.D. Cal. Sept. 18, 2020). That sort of release clarification applies to the entire class, transforms 14 the release, and corrects “problematic language that could have rendered the [settlement] 15 agreement subject to appeal and reversal.” Id.; see also Hendricks v. Starkist Co., No. 13-cv- 16 00729-HSG, 2016 WL 5462423, at *15 (N.D. Cal. Sept. 29, 2016) (objectors who “ensur[ed] that 17 the scope of the settlement’s release was narrowly tailored to the claims in [the] action” alerted the 18 court to “crucial flaws in the release language” that “made the [s]ettlement vulnerable to legal 19 challenges”); Kurihara, 2010 WL 11575583, at *1–3 (same); In re Sony PS3 “Other OS” Litig., 20 No. 10-cv-01811-YGR, 2018 WL 2763337, at *2 (N.D. Cal. June 8, 2018) (objector pointed out 21 multiple problems with the settlement, including “an overbroad release”). By contrast, here the 22 amendment to the release affects only a narrow subset of the class and addresses an issue too 23 insubstantial to make the settlement vulnerable to reversal on appeal. Cohen’s motion is thus 24 denied. 25 26 14 Mot. – ECF No. 262 at 2. 27 15 Id. at 7–9; Reply – ECF No. 267 at 2–3. 1 Second, Alvery Neace and Sammy Rodgers move for $47,395 in attorney’s fees, $505 in 2 costs, and incentive awards of $1,000 each.17 They contend that they addressed a “chronic 3 problem” in class-action settlements: unclaimed payments. Allegedly as a result of their objection, 4 (1) the settlement website was modified to make it easier for class members to update their 5 mailing and email addresses, (2) for returned checks, the settlement administrator will email the 6 class member and run address correction to obtain an updated address, (3) checks will be sent in 7 standard envelopes rather than “a cardboard [tear-off] that is ordinarily discarded as advertising,” 8 and (4) class members will have 120 rather than 90 days to cash checks.18 The plaintiffs again 9 oppose the request and describe these settlement changes as “limited, technical enhancements to 10 the claims administration process relating to the narrow set of Class Members electing to receive 11 their distributions by mailed checks.”19 12 Neace and Rodgers did not achieve a substantial enhancement of the settlement’s class 13 benefits. Several of the changes they caused are only “technical or coincidental.” In re HP Inkjet 14 Printer Litig., 2011 WL 2462475, at *1. Before the Neace/Rodgers settlement, the settlement 15 administrator already planned to (1) “run address correction” for returned checks and resend them 16 and (2) use Number 10 business envelopes, “which is the industry practice.”20 Furthermore, the 17 Neace/Rodgers changes are “minor [and] procedural.” Rodriguez, 688 F.3d at 658; see In re Sony 18 PS3 “Other OS” Litig., 2018 WL 2763337, at *2 (objector achieved substantial enhancement 19 where, among other changes to the settlement, he “vastly improved the claims rate”); In re 20 Homestore.com, Inc., No. 01-cv-11115-RSWL (CWX), 2004 WL 2792185, at *1 (C.D. Cal. Aug. 21 10, 2004) (substantial enhancement where the objector caused the court to “order[] that the class 22 be re-noticed, on a finding that a . . . substantial portion of the class would not have received 23 timely notice”); Fleury v. Richemont N. Am., Inc., No. 05-cv-04525-EMC, 2008 WL 4829868, at 24 *11 (N.D. Cal. Nov. 4, 2008) (a supplemental notice was not a substantial benefit because even if 25 26 17 Mot. – ECF No. 263 at 2. 18 Id. at 2–7; Reply – ECF No. 267 at 3–4. 27 19 Opp’n – ECF No. 266 at 9. ] it “generated additional opt outs,” it “did not affect the terms of the final settlement”). Neace and 2 || Rodgers’ motion is thus denied. 3 CONCLUSION 4 The court denies the settling objectors’ motions for attorney’s fees, costs, and incentive 5 awards. This resolves ECF Nos. 262 and 263. 6 IT IS SO ORDERED. 7 Dated: February 23, 2023 LAE 8 OS LAUREL BEELER 9 United States Magistrate Judge 10 1]

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